SBC may seek end of phone rate rules

November 10, 2005|By Jon Van, Tribune staff reporter

SBC Communications Inc. is expected to ask state regulators on Thursday to forgo established rules that set phone rates for Chicago-area customers.

The phone company says state oversight is no longer necessary because the Chicago phone market is fully competitive for residential service. It will ask in a filing with the Illinois Commerce Commission that market forces set the price for phone service.

Indeed, residential phone customers do have greater choice today than at any time in history.

Comcast Corp., the region's dominant cable company, offers digital phone service to much of the market and plans to make the service available to all by the end of next year. Comcast will also launch new consumer services in conjunction with Sprint Nextel Corp. in 2006 that include wireless phones.

Several companies offer Internet phone service to customers who have broadband connections, and many people have chosen to go without any wired phone service, opting to use mobile phones instead.

State figures show that SBC is losing customers. Among wired phone users in the Chicago market, SBC serves 72 percent, with the rest served by other carriers, according to figures by the ICC. In 2001 SBC served 85 percent of the wired market.

"We want Illinois to update its policies and keep up with other states," said Carrie Hightman, president of SBC Illinois.

In Michigan, Wisconsin, Ohio, Iowa and Missouri, legislators and regulators have recognized that competition is a better price regulator than government intervention, she said.

Deregulation in Illinois would enable SBC to offer customers new pricing packages more quickly than is now possible due to regulatory review requirements, Hightman said.

As its market share declined SBC has lowered rates to induce residential customers to stick with traditional phone service. It has also cut rates for digital subscriber line high-speed Internet connections, offering some DSL plans for $15 a month.

One company that was a major SBC competitor in the past--AT&T Corp.--will be merged with SBC in coming months.

As part of that merger federal authorities require that SBC/AT&T sell DSL service to consumers without their also having to buy traditional voice service, as SBC now requires. Once it offers "naked DSL" to consumers, SBC may face even more competition from companies that sell Internet phone service.

Market pricing has been in place for business customers for several years. But state regulators and consumer advocates have resisted extending full deregulation to the consumer market.

In the late 1990s SBC's predecessor, Ameritech, sought a similar determination, which was strongly opposed by consumer advocates.

Ameritech eventually withdrew that petition.

The ICC will have six months to review SBC's filing and make a determination whether the residential phone market is competitive enough to deregulate.

Consumer advocates will likely oppose SBC efforts to eliminate state oversight. Illinois faces rising natural gas rates and efforts by Commonwealth Edison to boost electrical rates, and to many advocates the term deregulation has become synonymous with rate gouging.

SBC's deregulation move comes as the ICC is in turmoil.

The state senate rejected the appointment of Martin Cohen, who had been a high-profile consumer advocate, as ICC chairman. Gov. Rod Blagojevich has vowed to appoint another chairman who will protect the state's consumer interests.